What do you call a passive fund that isn’t so passive? If you’re a marketing guru charged with selling more asset management products, you come up with a scientific name and pitch your fund as a sophisticated new solution for the problems of our times. Meet the smart beta phenomenon.
There is no hiding it, really – putting together a portfolio that is right for you is complicated, even if you use tracker funds or exchange traded funds, which are often misleadingly called ‘passive’ investments.
It takes considerable work and research to find an investment portfolio you are happy with and that meets your needs. It can help a lot if you speak to a financial planner, but even then, some preparation is recommended.
When constructing portfolios for clients, we aim to deliver the best possible performance for the lowest possible cost. A choice between the use of active managers or cheap passive exposure is key to achieving this, but the question is how to make that choice impartially.
The taxation of investments is a complex matter, but this shouldn’t stop investors from carrying out basic due diligence during the exchange traded fund (ETF) selection process to avoid unwelcome effects on returns.
UK investors have access to a wide array of ETFs listed on the London Stock Exchange. But being listed on the local UK exchange is no guarantee of tax efficiency. Some of these ETFs are listed in London just because it is the trading venue of choice for many international investors, so these ETFs may have been initially designed to suit the needs of non-UK investors.
Do passive index trackers offer solid returns for a low price, or are they asking investors to accept mediocrity in their portfolio? The latter, say active managers and their supporters; instead, they promise that skilfull stockpicking can provide market-beating returns. Fans of passive respond sceptically, noting that the actual track records of most active managers are more patchy.
Monika Dutt explains how new ETFs weighted to combinations of factors such as value and size are delivering strong results.
Research highlights why passive investors should look beyond the headline annual charge.
Investors are increasingly turning to inexpensive passive investments, particularly ETFs, to deliver returns. Is it bad for the economy?
Neil Woodford has slipped out of the top three in our most-bought funds league table.